Bailing Out Sub-prime Borrowers

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from a rescue bill. This bill is to help homeowners avoid foreclosure by offering at-risk borrowers the chance to refinance their old mortgages into new low-cost fixed-rate loans.

To qualify borrowers must live in their homes and have loans that were accuired between January 2005 and June 2007. Also, they must be spending a minimum 40% of their gross monthly income on all household debt to be eligible for the program. They do not necessarily have to be in default but they do have to prove that they will not be able to continue to make the payments. This is to avoid people defaulting purposely to get a lower payment.

There are more contingencies to this refinance offer. All other home debts like equity loans or lines of credit have to be closed. In fact, they will not be allow another home equity loan for 5 years unless it is an absolutely necessary home improvement.

The original lenders do have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In some hard hit areas that will mean a substantial loss for the lender. So the lender is going to have to believe that they would loose more money if they let it go into forclosure in order to go along with the refinance.

Each of these new loans will be underwritten by an FHA lender so banks will do all new appraisals. The income statements, bank accounts, job hisoties and credit scores will all have to be revisited also.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.

There will be some fees to consider, including a portion of any profits from future home-price appreciation. They aren't going to just bail everyone out. The FHA will get a 3% exit fee of the mortgage principal when the borrowers resell or refinance. If someone decides to sell or refinance within a year they will be giving 100% of the profits to the FHA. Each year after it will drop 10% till it reaches a minimum of 50%.

Even after all fees considered, it would be a blessing to many people. Not only do they get to stay in their home but they'll finally have a reasonable, fixed interest rate and no forclosure.

http://biz.yahoo.com/cnnm/080723/072308_housing_rescue_guide.html?.&.pf=loans

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Helping the Mortgage Market

The next big plan for helping out the mortgage industry is to full inform investors of the types of mortgages they are buying into. The idea is to promote confidence in the investment they are making so that mortgage-backed securities will be bought once again.

A group representing the buyers and sellers of mortgage backed securities unveiled a plan on Wednesday to recharge the moribund mortgage market.

In order for lenders to raise enough money to offer as many loans as they do, they have to bundle their mortgages and sell them to investors as mortgage backed securities. Lenders such as Countrywide, Wells Fargo and Wachovia will package a random assortment of these loans together and sell them to investors with very little information offered to the purchaser.

But then the losses began to add up and naturally people and institutions stopped buying these pools of residential mortgages. Therefore these lenders didn't have the extra cash for home buyers to get loans.

The American Securitization Forum has a plan, Project RESTART. The idea is to increase the supply of mortgage loans available to borrowers and also make them cheaper. Because of course if you jumpstart the mortgage market you jumpstart the housing market.

Part of the plan includes making these packaged loans more transparent. Clearly there is going to be more confidence in your investment if you are presented with all the facts and amount of risk ahead of time. This should also allow for more accurate pricing.

Previously the loans were packaged with a mixture of high and low risk. This makes it more difficult to understand what you're really getting into and makes pricing more vague. Obviously it's not feasable to provide all the information on each individual mortgage borrower but there is certainly more information that can be offered.

Also these loans would be bundled together by type. So that an investor can choose a group of mortgages that all are from prime borrowers with documented income, 720 credit score and a 20% downpayment. If a particular investor is into higher risk and higer payoff they could buy loans with subprime borrowers and low credit scores. The big idea here is that the investor would know which they are getting, and pay accordingly.

I think this sounds like a great idea. My only issue with this is, why is this just happening now?

http://money.cnn.com/2008/07/17/real_estate/jumpstarting_mortgage_markets/index.htm?postversion=2008071716

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June Market Report

June Residential Highlights

June sales activity was mixed when compared to that of May 2008. On the other hand, activity continues to follow a downward trend compared with 2007. From May to June, there was a 0.8% increase in closed sales (1,877 v. 1,863) - the second straight month of increasing sales. New listings also grew a slight 0.6% (5,213 v. 5,182). Pending sales, however, dropped 6% (1,996 v. 2,124). On the other hand, comparing June 2008 with June 2007, closed sales dropped 31.3% and pending sales decreased 30%. New listings were also down 16.3%. See table below. At the month’s rate of sales, the 17,788 active residential listings would last approximately 9.5 months, up slightly from 9.2 months in May.

Second Quarter

A look at the second quarter of 2008 compared with the same period in 2007 shows a 34.7% decrease in closed sales (5,461 v. 8,361) and 31% drop in pending sales (5,972 v. 8,652). New listings also fell 8.1% (15,973 v. 17,386).

Sale Prices

The average sale price for June 2008 was down 1% compared to June 2007, while the median sale price dropped 2%. See table below. Month-to-month, the average sale price and median sale price are both up over May 2008 levels; the average sale price rose 4.1% ($348,800 v. $335,000) and the median sale price was up 0.5% ($289,000 v. $287,500).

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Crawfish of the Caribbean

That is the theme for the 58th annual Crawfish Festival in Tualatin on Friday and Saturday August 8th & 9th. This year there is a Crawfish of the Caribbean Treasure Hunt. Clues will lead participants to various locations with a grand prize of a 42-inch flat-screen TV donated by West Coast Bank.

Also new this year will be the “Teen Scene” activities. Events such as a skate demonstration by members of the official Exit Real World team, an urban dance performance by Hip Hop Handbook and a free basketball clinic for pre-high school students by the Trail Blazer organization.

And just when you thought it wasn't exciting enough, the festival will be incorporating the TualaFest Battle of the Bands on Friday night at the Tualatin Community Park where local teenage bands compete for the TualaFest title.

Then the next night local blues musician Curtis Salgado will perform on the main stage from 6 p.m. to 8 p.m.

One thing that will never change, the Crawfish Cook-off on Friday night, and Saturday’s food court will feature more crawfish recipes than ever. Not to mention the crawfish eating contest and the parade.

Anyone wanting additional information about the Tualatin Crawfish Festival can visit www.tualatincrawfishfestival.com or call the Tualatin Chamber of Commerce at 503-692-0780. For advertising and further press inquiries contact Amanda Dalton at 503-639-8043.

http://tigardtimes.com/news/story.php?story_id=121565166839828000

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The Year of the Investment Buyer

The crazy-low home prices have finally begun to lure real estate investors into the market.

Sharon Restrepo, a broker in South Florida, where home prices have dropped nearly 27% over the past 12 months, recently bought a three-family home from a very motivated seller for a mere $65,000. It listed for $195,000. She can rent the three apartments out for about $1,500 and turn a profit, while she holds on to the property until the market recovers.

If you fancy yourself an investor, the down times are when you truly make your move.

Some places can be rented out while waiting for the market to swing the other way. Others can be bought distressed and then renovated. Either way, you have to wait for the market.

Some of these deals are not obvious. People are not necessarily listing their lowest price and your negotiating skills could come into play. No one wants to sit on inventory that is worth less than they owe. That loan is still outstanding regardless of value.

There are some companies out there flipping homes. They are getting a deal because they buy in bulk and then turn around and sell but sometimes without any improvements at all. The flipper is also buying any liens on the property but still manages to come out ahead.

Some have complained about the lack of renovation but this is how money is made. Not to mention a community full of neighbors is better than an area full of squatters and drug dealers. Home owners simply care more and take care of their community.

Some are still waiting to hit the very bottom. It is thought that there is still some falling to do. This is because there is still a discrepancy between what people are willing to pay and what banks are willing to sell for.

The lenders are holding their prices up as long as they can hoping someone will come along. Eventually they'll have to admit to themselves that buyer's will not pay it, not anymore.

But the end of the year will come, and they will still be sitting on a pile of inventory. Those properties simply cannot stay on the books through to next year. Then, game on.

http://money.cnn.com/2008/06/30/real_estate/vulture_investors_take_flight/index.htm?postversion=2008070212

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The Real Estate Picture

The majority of home searches today start on the internet and buyers today want to see lots of photos! It's true that a picture is worth a thousand words because nothing provides a potential buyer with more information than the photos.

And yet it is still WAY too easy to find examples of bad pictures, or even worse, no pictures on some listed properties. But if you give a little extra attention and focus you can have some eye catching photos that will make them stop and stare.

One common problem is too much light. I know this seems counter intuative but if you have tons of light coming in and you are pointing your camera right at the windows, then the camera thinks you have more than enough light and will leave you underexposed. Try framing up your shot, then point your camera away from the windows to focus (pushing the shutter button half way down). Then while still holding the button half way, turn back towards your original framed shot and push the button the rest of the way to take the actual picture.

Another challenge is white spots, like little UFOs appearing off of reflective surfaces. Try changing the angle of your picture so you aren't pointing directly at that mirror or glass. If that is not an option then turning off the flash should help.

Have you ever found yourself squinting at a picture of a living room or bathroom trying to figure out exactly what your are looking at? Lack of detail is such a common issue and makes the picture just as worthless as not having one at all. Before you take the picture, decide what the most important detail in the room is and hightlight it. Make sure that it is the element that is in focus. lighted and can be seen clearly.

Some photos can be too clear, as in they seem to zoom in on the flaws. Be aware of what the eye is drawn to in your picture and whether that is a good thing or a bad thing. You may need to change your position or do some tidying up first.

Even if you are doing everything right, you've got the formula down and your photos are perfect, they can become a bore. Every picture is the same angle and the same size. Play and get a little creative, it's the digital age and bad photos can easily be deleted. Mix in some vertical shots, get on your knees or bring out the ladder. Use the stairs to your benefit. Also, photo editing software seems to be very much underutilized in this day and age. Some people don't yet realise how influential online photos are to their number of showings.

Realtor Magazine. July 2008. Page 19

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Love The House You're In

When it comes to real estate, we are living in different times than we in 2005. There was all the reason in the world to trade-up back then. Today though, people are either nervous or don't have the option of changing to a new house so what does one do? Learn to love the house you're in.

So if you are able to swing it, now is the perfect time for some home improvements, not necessarily to up your resale but more so that you can love the home you're stuck with. This could be the perfect time to give your home the features you've been pining for.

Realtors from around the country have said that buyers are looking for more space, modern conveniences and luxury touches.

For more space, the way to go could be creating the illusion of size. The future of homes are that getting smaller and smaller. Things you could do are taking unneeded doors off their hinges. This creates a bigger visual space. Or a glass, perhaps french, door to add more light into the room.

Other options could be knocking down a wall. Most people only want half a wall or no wall seperating the kitchen from the family room. That will surely alleviate the claustrophobic feeling.

Another brilliant move would be to convert wasted space. Some people complain about a lack of living space but have an unfinished basement just collecting dust. Maybe it's not even a basement. Plenty of you out there have a room that has become sort of a catch-all or some room that no one even goes into. There is no cheaper way to expand your space than to change your unused guest room into a much used playroom. Or perhaps an out of the way storage room into a much needed home office.

A great idea which is gaining much popularity is an outdoor room. This can be as easy as landscaping or as involved as a new deck, retractable awning or a stone wall. Some are even enclosing their porch for a year round sun room.

Then there are the little modern conveniences that people just put on their list "for the next house". Things like two-sink bathrooms, a laundry room or central air could not only make you more happy and comfortable but can also add a lot of value down the line. A popular decision would be to put the laundry room near the bedrooms. No one likes to lug around laundry bags and people have been paying for poor planning for too long.

When it comes to a touch of luxury there are plenty of little splurges to choose from. You may or may not get that dollar value back, depending how crazy you go, but you'll certainly get value out of it's use. Either way it will be a selling point if you can get yourself to part with your home.

Splurges like a big soaking tub in the master bathroom. People are really digging the idea of a spa like retreat in their own home. If you have the room a seperate shower from the tub can be quite appealing, especially if the shower has multiple heads shooting in numerous directions.

Other popular luxuries are in the kitchen. Although it looks fancy to have really expensive commercial grade appliances, most people simply don't need all that. If you, like a lot of families, use your kitchen for eating, hanging and doing homework in then you'll want to focus your money and efforts into a breakfast bar or center island. Even those who don't cook love a luxury counter surface, just don't go for trends. Concrete and stainless steel tops probably won't be in when you go to sell but things like granite will never count subtract value.

You won't be the only one happy with your improvements, resale value and eye catching features can only help you in the long run. Of course if you give your current home the features you desire in your next home, perhaps you'll end up not wanting to leave after all.

http://money.cnn.com/2008/06/19/real_estate/tips/home_with.moneymag/index.htm?postversion=2008062403

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